Value Tools Applied to Everyday Problems A Tutorial for the Baltimore Section of the American Society for Quality 12 December 2005 LCEA Life Cycle Engineering Associates 11/11/2018 Value Mgmt/asq value meeting_12Dec05.ppt

Topics Concepts of Value Concepts of Cost Value Engineering Tools Pitfalls in Analysis 11/11/2018 Value Mgmt/asq value meeting_12Dec05.ppt

Wisdom Through the Ages “give me a lever and a place to stand and I can move the world” …Archimedes, 3d century BC “ to measure is to know.” ….James Maxwell, 1871 “If you can’t measure it…you can’t manage it.” …. ???, ??? “ I can measure anything... or derive a reasonable value for it” ...???, 17 September 2001 11/11/2018 Value Mgmt/asq value meeting_12Dec05.ppt

Goals of this Session Give examples of how to begin the value analysis process using everyday examples Show that imagination must compliment data in arriving at product/service valuations Perceptions must also be quantified and normalized to tangible values Identify some of the pitfalls in valuations 11/11/2018 Value Mgmt/asq value meeting_12Dec05.ppt

A measure of appropriate cost and performance What is Value? A measure of appropriate cost and performance value always increases by decreasing cost value increases by increasing performance [if Customer needs, wants & is willing to pay for] Maximum Value is never achieved 11/11/2018 Value Mgmt/asq value meeting_12Dec05.ppt

Value in ‘Qualitative’ Terms Simply: What is received [benefit] What is paid [cost] More detailed: Actual Benefit + Perceived Benefit Price+ Inconvenience + Perceived Cost Value = Value = Notes: Perceived Benefits or cost include emotions, expectations exceeding reality, additional service, treatment, fairness, “KANO characteristics [can be positive or negative] Inconvenience is the ‘burden’ associated with the product/service purchased [cost of poor quality, training, inspection, “opportunity costs’ mathematical relationships can be defined for each sub-level of the model; not necessarily linear relationships use of KANO model characteristics can also be quantified or mathematically modeled 11/11/2018 Value Mgmt/asq value meeting_12Dec05.ppt

Finding Data on Value Sources More on surveys survey data focus groups Comparison shopping market research companies includes market share, income/expenses, product cost More on surveys structured to get results ask how much you would pay for the feature of service ask about compensation expected if needs aren’t met 11/11/2018 Value Mgmt/asq value meeting_12Dec05.ppt

Sample Survey Questions Question is designed to get more information about what customers would pay for reliable appliances: given the inconvenience of getting warranty work done, would you prefer not to have warranty work in the first place? How much would you pay for this level of convenience? < $10 $11-$50 $51-$100 $101-$150 $151-$200 >$200 11/11/2018 Value Mgmt/asq value meeting_12Dec05.ppt

Concepts of Cost How can we verify that the brand name is actually worth $8000? Surveys, focus groups comparison shopping Is the Name Brand worth $8000? * PV = perceived value 11/11/2018 Value Mgmt/asq value meeting_12Dec05.ppt

Value Engineering Tools Kano Value Analysis Matrix [VAM] Spider web chart Value stream map F.A.S.T. diagram 11/11/2018 Value Mgmt/asq value meeting_12Dec05.ppt

KANO Modeling: Finding “Breakthrough” Opportunities Overview of the Model Human response to product attributes falls along these three main curves. Suppliers of products/services need to know how to react to these attributes This axis shows how positively Customers respond to the attributes + EXCITEMENT PERFORMANCE EXCITEMENT curve - “delights Customers”[even when not well executed] commands a price “premium”; advertise accumulate “profit” on these features as long as possible - + BASIC This axis shows how well the Customers perceives the attributes are being supplied. PERFORMANCE curve - roughly a 1-to-1 relationship on how well a supplier delivers an attribute and future Customer loyalty strategy: advertise those that are done well; downplay others accumulate “profit” on these features as long as possible BASIC curve - must provide these attributes just to stay in the market. If poorly executed/delivered, will definitely lose the “offended” Customer, plus may lose others through poor ‘word-of-mouth’ strategy: don’t waste money on advertising or sales force training, because cost would outweigh benefits; look at cost-effective quality improvement programs - 11/11/2018 Value Mgmt/asq value meeting_12Dec05.ppt

Value Analysis Matrix [VAM] 11/11/2018 Value Mgmt/asq value meeting_12Dec05.ppt

Spider Web Chart 11/11/2018 Value Mgmt/asq value meeting_12Dec05.ppt

Value Stream Map [changing a tire] 11/11/2018 Value Mgmt/asq value meeting_12Dec05.ppt

F.A.S.T. Diagram [Mouse Trap] 11/11/2018 Value Mgmt/asq value meeting_12Dec05.ppt

Pitfalls [part 1] 11/11/2018 Value Mgmt/asq value meeting_12Dec05.ppt

Pitfalls [part 2] 11/11/2018 Value Mgmt/asq value meeting_12Dec05.ppt

Summary Much of Value is perceived One can always measure/calculate value Imagination is required in determining value Branding can add much to the bottom line Many ways of determining value; most are easy Be careful of the pitfalls 11/11/2018 Value Mgmt/asq value meeting_12Dec05.ppt

[not covered in the session] Other Examples [not covered in the session] 11/11/2018 Value Mgmt/asq value meeting_12Dec05.ppt

Customer Feedback: Survey Questions to Support KANO 11/11/2018 Value Mgmt/asq value meeting_12Dec05.ppt

Value Stream Map [housekeeping] 11/11/2018 Value Mgmt/asq value meeting_12Dec05.ppt

Cost of Losing Customers 11/11/2018 Value Mgmt/asq value meeting_12Dec05.ppt

For more information, contact... John Weisz CQE CRE Life Cycle Engineering Associates [LCEA] 410-987-1287 (cell) 443-848-1641 johnweisz36@hotmail.com LCEA Life Cycle Engineering Associates 11/11/2018 Value Mgmt/asq value meeting_12Dec05.ppt